Board Independence, the Information Environment, and Audit Fees

John Zhang ()
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John Zhang: Durham University

No 2804805, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: To enhance board oversight, since 2002 US legislation has required listed companies to have a majority independent board. This paper uses this legislative change to examine the relation between board independence and audit fees. To provide a clean estimate of this relation, we adopt a difference-in-difference approach using a sample matched on client firm characteristics. We find that greater board independence is insignificantly associated with a change in audit fees when client firms operate in a weak information environment. When the information environment is strong, greater board independence is associated with an increase in audit fees. Our results are consistent with a nascent theory emphasising information asymmetry and provide insight into the effectiveness of the mandated board independence in relation to audit quality.

Keywords: audit fee; board independence; information environment (search for similar items in EconPapers)
Pages: 1 page
Date: 2015-10
New Economics Papers: this item is included in nep-acc
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Published in Proceedings of the Proceedings of the 19th International Academic Conference, Florence, Oct 2015, pages 918-918

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:2804805

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